1H 2021 HALF-YEAR REPORT - OTELLO CORPORATION ASA - Cision
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HALF-YEAR REPORT 1H 2021 OTELLO CORPORATION ASA
HIGHLIGHTS
• Successful IPO of Bemobi in Brazil
• Signed and closed definitive
agreement to sell AdColony to
Digital Turbine
• Generated $164 million in gross
proceeds from Bemobi IPO and first
installment from Digital Turbine
• Repaid all interest-bearing debt, a
total of $35 million
• Launched buyback program to all
shareholders buying back $52
million worth of Otello shares
*For further information regarding Adjusted EBITDA and other alternative performance measures used by Otello, see Note 11 of
the interim condensed financial statements
Key figures (USD million)* 1H21 1H20 YTD 2021 YTD 2020
Revenue 0.0 0.0 0.0 0.0
AdColony (Mobile Advertising) 0.0 0.0 0.0 0.0
Bemobi (Apps & Games) 0.0 0.0 0.0 0.0
Corporate 0.0 0.0 0.0 0.0
Adj. EBITDA (3.6) (2.3) (3.6) (2.3)
AdColony (Mobile Advertising) 0.0 0.0 0.0 0.0
Bemobi (Apps & Games) 0.0 0.0 0.0 0.0
Corporate (3.6) (2.3) (3.6) (2.3)
EBIT (14.5) (3.3) (14.5) (3.3)
Net income (12.8) 3.8 (12.8) 3.8
EPS (USD) (0,10) 0,03 (0,10) 0,03
*Continuing operations, 1H20 re-representedGROUP PERFORMANCE depreciation and amortization from intangible
assets.
To provide a better understanding of Otello’s
Other operating expenses were USD 1.0
underlying performance, the following
million in 1H21 (USD 0.9 million), up 19
presentation of operating results excludes
percent from the corresponding period last
certain non-recurring and non-operational
year, due in particular to high activity level
items from EBITDA, such as transaction
and transactions in the half.
costs, stock-based compensation,
restructuring and impairment expenses, as
well as other items that are of a special
Adjusted EBITDA and EBITDA
nature or are not expected to be incurred on
an ongoing basis.
Adjusted EBITDA
Adjusted EBITDA was USD (3.6) million in
Development during the half
1H21, compared to USD (2.3) million in the
corresponding period in 2020, down due to
1H21 was a very eventful for Otello with both
higher cost in 1H21 vs 1H20.
the successful IPO of Bemobi in Brazil as
well as signing and closing of AdColony sale
EBITDA
to Digital Turbine.
EBITDA was USD (5.8) million in 1H21, down
from USD (2.7) million in the corresponding
As a result of these transactions both
period in 2020. The lower EBITDA is due to
AdColony and Bemobi have been treated as
higher expenses in 1H21 vs 1H20.
discontinued businesses in 1H21. Thus, all
numbers below only relate to Corporate (HQ)
Impairment and restructuring expenses
For details on discontinued operations
In 1H21 Otello did a $8.3 million write off
please refer to Note 4 in this report.
linked to Vewd Software AS. Otello entered
into a loan agreement in 2017 of $5 million
Total operating expenses (including
with Vewd Software AS (formerly Opera TV
depreciation and stock-based compensation
AS). This loan is outstanding, with an
expenses but excluding restructuring
accrued interest of $1.0 million, as of June
expenses) increased 96% vs 1H20, due in
30, 2021. In addition, Otello has accrued
particular to higher payroll and stock-based
£1.66 million to reflect the part of the Otello’s
compensation due to increasing shareprice
cost that MFC has been ordered to pay as
and the successful completion of Bemobi
part of the ongoing legal proceedings
IPO and AdColony sale.
between the parties. Both the loan, interests,
and the accrued expenses have been written
Payroll and related expenses, excluding
off as of June 30, 2021, due to uncertainties
stock-based compensation expenses, were
of collectability.
USD 2.6 million in the 1H21, versus USD 1.5
million in 1H20, up 69 percent from the
Net financial items
corresponding period last year due to higher
Otello recognized a gain from net financial
variable pay.
items in 1H21 of USD 2.7 million, compared
to a gain of USD 9.6 million in the
Stock-based compensation expenses were
corresponding period last year.
USD 2.2 million in 1H21 compared to USD
0.3 million in 1H20, up due to a significant
Net income
increase in the shareprice in the period and
acceleration of options. 1H21 net income was USD (12.8) million
compared to USD 3.8 million in the
corresponding period last year. The 1H21
Depreciation and amortization expenses
numbers are negatively impacted by a write
were USD 0.4 million in 1H21 (USD 0.6
off linked to Vewd Software AS and expense
million), down versus the corresponding
linked to Bemobi IPO and AdColony sale.
period last year with a reduction in overall
EPS and fully diluted EPS for the continuing
operations were USD (0.10) and USD (0.10),respectively, in 1H21, compared to USD 0.03 complete repayment of all interest-bearing
and USD 0.03, respectively, in 1H20. debt USD (35.5) million.
Financial position and cash flow Cash and cash equivalents at the end of
Otello’s net cash flow from operating 1H21 were USD 68.0 million compared to
activities was USD (11.0) million in 1H21, USD 33.5 million in 1H20. In 1H21 Otello
compared to USD (6.1) million in 1H20, down repaid all its interest-bearing debt and
due to higher cost from the Bemobi IPO and subsequently cancelled the Revolving Credit
AdColony sale. Cash flow from investment Facility (RCF) agreement with DNB Bank
activities amounted to USD (0.1) million, vs ASA.
USD (0.0) million from the corresponding half
last year. The company’s equity was USD 286.9 million
at the end of 1H21, corresponding to equity
Cash flow from financing activities was USD ratio of 92.6%.
(87.6) million in 1H21, compared to USD 8.8
million in 1H20. Use of cash in the first half Organization
2021 relates predominantly to share
buybacks USD (52.1) million and the At the end of the 1H21, Otello had 9 full-time
employees and equivalents.
BUSINESS OVERVIEW
AdColony
Business Overview Financial Overview
AdColony is a leading mobile advertising Due to the sale of AdColony to Digital
platform dedicated to delivering authentic Turbine which was executed effectively 29.
advertising experiences across today’s top April 2021 the business is treated as
apps. Originally founded in 2008, AdColony discontinued operations for the period.
has been an innovation leader in mobile
advertising and monetization since Apple
first introduced the App Store. Founded by Transaction
game developers, for game developers, Otello announced in 1H21 that it had entered
AdColony is committed to delivering an into a definitive agreement to sell AdColony
experience that makes monetizing a win for to Digital Turbine, Inc. (Nasdaq: APPS) for a
advertisers, developers, and users alike. total estimated consideration of $400 million.
AdColony’s mission is to drive business Digital Turbine is a global mobile technology
outcomes that matter for advertisers and
company, passionate about delivering the
publishers using its best-in-class mobile
technology, the highest-quality mobile ad right content to the right person at the right
experiences and leveraging curated reach. time across all Android devices. The
company's on-demand media platform
Thanks to industry-leading research, powers frictionless app and content
consumer insights, and award-winning discovery, user acquisition and engagement,
campaigns globally, AdColony has been at operational efficiency, and monetization
the top of the conversation about mobile opportunities. Digital Turbine's technology
games and how they factor into the global platform has been adopted by more than 40
consumer mindset both in general and in this mobile operators and OEMs worldwide and
specific moment in time. has delivered more than three billion app
preloads for tens of thousands of advertising
campaigns. The Company is headquartered
in Austin, Texas, with global offices inArlington, Durham, Mumbai, San Francisco, Actual, unaudited 2Q21 performance for
Singapore, and Tel Aviv. AdColony on net revenue was @ 96.7% vs.
the plan agreed with Digital Turbine, which is
Total estimated consideration for the tied to our annual guidance of $250-290
acquisition is $400 million, including a million in Gross Revenue.
normalized amount of working capital and
$19 million in cash. Some or all of the cash Combined, the actual, unaudited 1H21
will be returned to Otello subject to the performance for AdColony on net revenue
achievement of certain future net revenue was @ 101.03%. AdColony's 1H21
targets: (1) $100 million in cash to be paid at performance extrapolated for the full FY
closing (2) $100 million in cash to be paid six 2021 would yield a payout of around 105.5%
months following the closing, and (3) on- of plan or around $211 million for the earn-
target earn-out of $200 million, to be paid out portion of the payment.
fully in cash, based on AdColony achieving
certain future target net revenue objectives in
2021. The earn-out portion is not capped and
is subject to change based on actual results.
Actual, unaudited 1Q21 performance for
AdColony on net revenue was @ 106.35%
vs. the plan agreed with Digital Turbine,
which is tied to our annual guidance of $250-
290 million in Gross Revenue.
Bemobi for digital distribution (Loop) monitors the
consumption of millions of mobile users, in
Business Overview partnership with some of the largest carriers
in the world, to understand their journey and
Bemobi is a Technology company transform friction points into digital channels
specializing in the distribution and that bring relevant offers to each user at the
monetization of apps, games, and mobile right time, on the most adequate channel and
digital services. We operate in a B2B2C at a suitable price.
(Business-to-Business-to-Consumer) model,
i.e., we offer our services to a company that Our “end-to-end” platform connects
offers them to the final consumer. Bemobi smartphone users to applications, games,
currently operates in partnership with mobile and digital services. It is a win-win model
network carriers, enabling our services to be capable of generating value for all parties
paid for via prepaid credit and/or postpaid involved, and that is promoted through
accounts. revenue share agreements.
Our business is based on an innovative Mobile telecom providers allow us to use its
model of subscriptions at the right pricing customers’ invoice, creating an inclusive and
point, in line with the reality of the majority of accessible digital collection model for the
the population in Brazil and other emerging majority of the population in the countries
countries. We also offer several microfinance where we operate. The carriers are benefited
services that further enable and accelerate by offering clients a services suite that ends
the popularization of digital services. up becoming even more complete, as they
add their brands to our services, helping their
Drawing on Artificial Intelligence and promotion and communication within the
Machine Learning, our proprietary platform market, thus generating new revenues, andboosting the profitability of their current client payment of R$ 431,637,688.80
base. (approximately USD 78 million), less R$
543,334.35 in Brazilian tax, has been paid
App and game developers, in turn, seize from Bemobi Brazil to Otello Technology
value through recurring additional revenues Investment AS (formerly Bemobi Holding
due to our digital channels, our attractive AS), of which R$ 362,215,321.83
pricing model and our collection skills. All of (approximately USD 65 million), less the
these attributes are different from and relevant share of the Brazilian tax, was paid
complementary to traditional models. to Otello Corporation ASA.
Last, the final consumer - the focus of our Information regarding the IPO of Bemobi
attention and the main beneficiary - gains Brazil, including the Brazilian Final
access to a complete and innovative portfolio Prospectus, is available in Portuguese on the
of digital products and services at a suitable websites of Bemobi Brazil
price and with easy payment methods. (https://www.bemobi.com.br), the Brazilian
These factors have historically limited access underwriters, the CVM and the São Paulo
to mobile entertainment apps. stock exchange. Following the successful
IPO of Bemobi on Bovespa in Brazil, Otello
Bemobi IPO Corporation ASA ("Otello") is now a major
shareholder in Bemobi Brazil with an
On February 9, 2021, Otello announced that ownership below 50%. Consequently,
Bemobi Mobile Tech S.A. ("Bemobi Brazil"), Bemobi financials are no longer consolidated
had set a price of 22.00 Brazilian real (“R$”) into Otello's accounts but are booked
per common share for its IPO. Based on this according to the equity method. Please see
price, the gross proceeds of the primary note 6 for more information about the equity
component of the IPO, reached R$ method accounting.
1,094,117,684 ($203,943,536), resulting in
an equity value, post-money, of Bemobi It is expected that any future sale of shares
Brazil at IPO of R$ 2,000,000,024 in Bemobi Brazil will be subject to capital
($372.800.004). gains tax in Brazil. Such gains are subject to
progressive rates, based on the taxable
On February 10, 2021, Bemobi Brazil had its profit.
first day of trading on the Bovespa stock
exchange in Sao Paolo, Brazil, under the Under existing tax laws, tax is payable as
ticker “BMOB3”. Otello’s ownership pre-IPO follows:
was 34,553,860 shares in Bemobi, equal to
83.92% ownership, with other shareholders 1) 15.0% on capital gains up to R$ 5
holding 6,622,610 shares (16.08% million
ownership) and hence a full sharecount of 2) 17.5% on the portion of capital gains
41,176,470. The base offering for the IPO between R$ 5 million and R$ 10
was 49,732,622 shares, hence giving a total million
share count post-IPO of 90,909,092 shares, 3) 20.0% on the portion of capital gains
with Otello’s ownership reduced to 38.01%. between R$ 10 million and R$ 30
million
The managers in the IPO sold an additional 4) 22.5% on the portion of capital gains
1,834,272 of the potential 6,388,478 shares over R$ 30 million
under the greenshoe option, reducing
Otello's ownership in Bemobi Brazil to As of reporting date, the tax cost base of
35.99%. After fees and taxes, Otello Otello's remaining 35.99% shareholding in
Technology Investment AS received net Bemobi Brazil is R$ 242,396,152.87.
proceeds from the greenshoe option of R$
33,583,598.60 (approximately $6 million). VEWD
As part of the use of proceeds in connection Otello finalized an agreement on December
with the IPO, a dividend and share proceed 19, 2016, to sell its TV business ("Opera TV")for $80 million. As part of this agreement, will be appointed if MFC had not purchased
Otello retained an approximately 27% equity Otello’s shares in Last Lion and the Loan
interest in Last Lion Holdings Ltd, through Note by January 8, 2021. That deadline was
preferred shares, which indirectly owns extended to March 19, 2021, following
Opera TV through Last Lion Holdco AS. In agreement between MFC and Otello to allow
2017, Opera TV AS changed its name to further time for MFC to seek refinancing to
Vewd Software AS. raise funds to enable it to pay in full the sums
due to Otello. The English High Court had
VEWD – Otello's case regarding the ordered that the appointment of a receiver (or
potential sale of Vewd minority stake alternatively a special committee of the board
of Last Lion Holdings Limited tasked with
As reported to the market on September 14, selling the company or raising finance) would
2018, Otello was successful in its claim in the take effect on March, 22, 2021, if Otello has
High Court of Justice of England and Wales not been paid the sums due to it by March 19,
against Moore Frères & Co LLC ("MFC") and 2021.
Last Lion Holdings Limited (“Last Lion”),
arising from the refusal of the Board of Last On March 17, 2021, MFC and Otello together
Lion, which is controlled by appointees of with the Vewd Group's secured lenders (the
MFC, to approve the sale of Otello’s “Lenders”) under a Credit Agreement dated
remaining ownership stake in Last Lion, December 19, 2016, between Last Lion
being approximately 27% in the Vewd HoldCo AS, Vewd Software AS, the Lenders
Software business. The judge granted Otello and Wilmington Trust National Association
the injunction it sought requiring the Board to ("Wilmington Trust") reached agreement that
approve the buyer. as an interim alternative to the appointment
of a receiver, a special committee (the
The buyer did not purchase the shares on the "Special Committee") of the board of Last
terms of the expired Share Purchase Lion Holdings Limited shall be appointed.
Agreement. Otello subsequently restored the The Special Committee was tasked with
proceedings in order to pursue alternative selling the company or raising finance. The
remedies. The High Court determined that agreement as to the Special Committee's
MFC should be required to purchase Otello’s terms of appointment was recorded in an
shares in Last Lion from Otello for the sum of order of the High Court dated 1 April 2020.
$48 million and that MFC should be required The Special Committee was appointed on 26
to purchase the Loan Note issued in Otello’s April 2021.
favour by a subsidiary of MFC for $5 million
plus accrued interest at the time of purchase MFC was ordered to pay Otello’s costs of this
(currently approximately $1.2 million). It is part of the proceedings (having previously
however understood that MFC’s only been ordered to pay and having paid the
substantial asset is its shareholding in Last costs of the liability stage). MFC was ordered
Lion. to pay £1.25 million as an interim payment on
account by 31 December 2020, which it failed
In default of compliance by MFC with the to do. The costs have been agreed at £1.5
order for the purchase of Otello’s shares in million and the High Court ordered that sum
Last Lion and the Loan Note, the High Court should be paid by MFC to Otello by 19 March
ordered that all of the shares in the Company 2021. MFC failed to pay, and interest is now
shall be sold to a third party with a receiver running on that sum at the judgment rate of
appointed with all necessary powers to 8% from 31 December 2020 on £1.25 million
conduct the sale with the net proceeds of a and on the balance of £250,000 from 26
sale being applied in satisfaction of MFC’s February 2021. MFC has also been ordered
obligation to purchase the shares and the to pay further costs totaling £70,000 in
Loan Note. The court ordered that a receiver respect of hearings since the handing downof judgment and those costs are also unpaid The implications of these actions are not yet
with interest running, also at 8%. Otello is clear, although the Special Committee
seeking to enforce these costs awards members have indicated that they are likely
against MFC’s assets in New York. to accept the invitation to join the boards of
Last Lion HoldCo AS and Vewd Software AS
If the Special Committee were successful in and that following such appointments they
achieving either a sale or a refinancing at a would remain committed to pursuing a sale
sufficient level once the sums due to the and/or refinancing transaction that
Lenders have been repaid, Otello will maximizes value. It is Otello's understanding
receive: that the investment bank that has been
appointed by the Special Committee will
(1) For its shares in Last Lion, either continue and remains focused on achieving
a successful sale or refinancing of the
(i) $48 million plus accrued interest business through a competitive and robust
from January 8, 2021, at US Prime process. As was the situation before this
interest rate plus 1% or development, it is likely that Otello will only
be able to recover the sums due to it once the
(ii) its pro rata share of any sale Lenders have been repaid in full.
proceeds, whichever is greater; and
The English Court order requiring the
(2) The face value of $5 million plus accrued establishment of the Special Committee
interest thereon in respect of the secured remains in force and that order formally
promissory note issued to Otello by Last Lion requires that alternative members will need
Management LLC, together with all sums to be appointed to the Special Committee.
due in respect of cost orders made during the After three months from the appointment of
court proceedings together with accrued the Special Committee (which fell on 26 July
interest on those cost orders. 2021), Otello has the right to terminate the
Special Committee process and seek the
On 12 July 2021 we were informed of the appointment by the English Court of a
resignation of the three members of the Receiver in respect of LLH. In the absence of
Special Committee. The Special Committee such termination by Otello, the appointment
members have given as their reason for of the Special Committee will end on 1
resigning, the exercise of certain rights by October 2021, unless extended with the
Wilmington Trust as agents for the Lenders consent of Otello and the Lenders. Following
under the Credit Agreement. Wilmington any such termination, Otello has the right to
Trust, on behalf of the Lenders, has seek further relief from the English High
accelerated the loans and exercised certain Court including the appointment of a receiver
rights and remedies under the Credit in respect of LLH.
Agreement so as to remove Martez Moore
from the boards of Last Lion HoldCo AS and
Vewd Software AS and to enable the
appointment of the Special Committee
members directly to those boards. The
reason provided by the Lenders for
exercising rights and remedies was to
preserve the value of the business, noting
that, among other things, Mr. Moore had paid
himself and his family (including his late
wife's estate) millions of dollars since 2016.OUTLOOK
Otello’s strategic focus has been to build and grow companies with the ambition to create the
highest possible value for our shareholders. We saw the culmination of this effort in 1H21
where we were able to both IPO Bemobi on the Bovespa in Brazil at a significant premium to
our initial purchase price, as well as sign and close a transaction selling AdColony to Digital
Turbine.
In Bemobi, Otello remains the biggest shareholder and is positive about the prospects of the
business. Bemobi has recently signed two acquisitions which are expected to nearly double
the revenue for Bemobi. As the lock-up of the remaining shares in Bemobi expires in 3Q21,
Otello will have an opportunistic view on its financial investment in the company.
AdColony, which was sold to Digital Turbine in April 2021, is currently in the earn-out phase
which lasts for the full calendar year 2021. The total payment to Otello will be determined
based on the actual performance of the business in this period.
For Vewd, the implications of the latest developments reported in our announcement dated
August 14th are not yet clear, and we will update the market as information becomes available.
Otello has, as a result of the transactions above and proceeds received, already repaid all our
debt and launched and completed a share buyback program accessible to all shareholders.
Going forward, the goal is to maximize the value of all our remaining assets and aggressively
return cash to shareholders, most likely through a combination of share buybacks and
dividends.
Oslo, August 26, 2021
The Board of Directors
Otello Corporation ASA
Andre Lars
Christensen Boilesen
Chairman CEO
(sign.) (sign.)Interim condensed financial statements
Consolidated statement of comprehensive income
Note 1H 2021 1H 2020 % YTD 2021 YTD 2020 %
Re-presented change Re-presented change
(USD million, except earnings per share)
Continuing operations
Revenue 3 0.0 0.0 815 % 0.0 0.0 815 %
Total operating revenue 0.0 0.0 815 % 0.0 0.0 815 %
Publisher and revenue share cost 3 (0.0) 0.1 -101 % (0.0) 0.1 -101 %
Payroll and related expenses 3 (2.6) (1.5) 69 % (2.6) (1.5) 69 %
Stock-based compensation expenses 3 (2.2) (0.3) 572 % (2.2) (0.3) 572 %
Depreciation and amortization expenses 3 (0.4) (0.6) -31 % (0.4) (0.6) -31 %
Other operating expenses 3 (1.0) (0.9) 19 % (1.0) (0.9) 19 %
Total operating expenses (6.2) (3.2) 96 % (6.2) (3.2) 96 %
Operating profit (loss), (EBIT), excluding impairment and restructuring expenses (6.1) (3.2) (6.1) (3.2)
Impairment and restructuring expenses 7 (8.4) (0.1) (8.4) (0.1)
Operating profit (loss), (EBIT) (14.5) (3.3) (14.5) (3.3)
Net financial items 8 2.7 9.6 2.7 9.6
Profit (loss) before income tax (11.8) 6.3 (11.8) 6.3
1)
Provision for taxes (1.0) (2.5) (1.0) (2.5)
Profit (loss) (12.8) 3.8 (12.8) 3.8
Discontinuing operations
Profit (loss) from discontinuing operations, net of tax 4 56.4 (3.0) 56.4 (3.0)
Profit (loss) from discontinuing operations 56.4 (3.0) 56.4 (3.0)
Items that may or will be transferred to profit (loss)
Foreign currency translation differences 1.1 (15.8) 1.1 (15.8)
Discontinuing operations - reclassified to profit (loss) 0.6 (21.2) 0.6 (21.2)
Total comprehensive income (loss) 45.4 (36.2) 45.4 (36.2)
Earnings (loss) per share:
Basic earnings (loss) per share (USD) 0.33 0.01 0.33 0.01
Diluted earnings (loss) per share (USD) 0.33 0.01 0.33 0.01
Shares used in earnings per share calculation 133,884,337 137,705,818 133,884,337 137,705,818
Shares used in earnings per share calculation, fully diluted 133,884,337 137,705,818 133,884,337 137,705,818
Earnings per share (continuing operations):
Basic earnings (loss) per share (USD) (0.10) 0.03 (0.10) 0.03
Diluted earnings (loss) per share (USD) (0.10) 0.03 (0.10) 0.03
Shares used in earnings per share calculation 133,884,337 137,705,818 133,884,337 137,705,818
Shares used in earnings per share calculation, fully diluted 133,884,337 137,705,818 133,884,337 137,705,818
1)
The 1H and YTD provision for taxes is based on an estimated tax rate for the Group.Consolidated statement of financial position
Note 6/30/2021 6/30/2020 12/31/2020
(USD million) (Audited)
Assets
Deferred tax assets - 26.8 26.1
Goodwill - 218.1 219.7
Intangible assets 0.0 14.8 12.8
Property, plant and equipment 1.3 5.7 6.0
Right of use assets 12 0.1 3.6 3.0
Lease receivables 12 - 0.2 0.0
Other investments 6 144.3 16.9 18.7
Other non-current assets 1.1 0.3 0.3
Total non-current assets 146.9 286.4 286.6
Accounts receivable 10 0.1 62.8 89.5
Lease receivables 12 - 1.4 0.9
Other receivables 10 94.9 10.6 6.4
Cash and cash equivalents 9 68.0 33.5 41.9
Total current assets 162.9 108.3 138.7
Total assets 309.8 394.7 425.3
Note 6/30/2021 6/30/2020 12/31/2020
(USD million) (Audited)
Shareholders' equity and liabilities
Equity attributable to owners of the company 286.9 304.3 306.8
Non-controlling interests 4 0.0 (0.5) (0.4)
Total equity 286.9 303.8 306.4
Liabilities
Deferred tax liability 6 19.7 0.0 0.0
Lease liabilities 12 0.0 1.5 1.2
Loans and borrowings 9 - 30.0 -
Other non-current liabilities 1.1 1.1 1.6
Contingent consideration, non-current - - -
Total non-current liabilities 20.8 32.6 2.8
Loans and borrowings 9 - - 35.0
Lease liabilities 12 0.1 3.5 2.8
Accounts payable 0.2 19.4 25.7
Taxes payable 0.2 0.8 2.0
Public duties payable 0.0 0.3 1.3
Deferred revenue - 0.7 1.8
Stock-based compensation liabilities 0.9 0.0 0.0
Other current liabilities 0.6 33.3 47.3
Contingent consideration, current 0.0 0.2 0.2
Total current liabilities 2.1 58.3 116.1
Total liabilities 22.9 90.9 118.9
Total equity and liabilities 309.8 394.7 425.3Consolidated statement of cash flows
Note 1H 2021 1H 2020 YTD 2021 YTD 2020
(USD million)
Cash flow from operating activities
Profit (loss) before taxes 48.4 1.8 48.4 1.8
Income taxes paid (0.0) 0.4 (0.0) 0.4
Depreciation and amortization expense 6.7 12.9 6.7 12.9
Net (gain) loss from disposals of PP&E, and intangible assets 0.0 0.0 0.0 0.0
Net (gain) loss from sale of discontinued operations, net of tax 4 (55.3) (0.0) (55.3) (0.0)
Impairment losses on other investments 6 8.3 - 8.3 -
Changes in inventories, trade receivables, trade and other payables 8.6 9.8 8.6 9.8
Other net finance items 0.7 1.0 0.7 1.0
Changes in other operating working capital (6.2) (8.0) (6.2) (8.0)
Share of net income (loss) and net (gain) loss from disposal of associated companies 6 (1.3) 0.0 (1.3) 0.0
Share-based remuneration (12.7) 1.2 (12.7) 1.2
Earnout cost and cost for other contingent payments 0.0 - 0.0 -
Net (gain) loss from disposals of subsidiaries and other share investments (0.6) 0.0 (0.6) 0.0
FX differences related to changes in balance sheet items 5.7 (9.5) 5.7 (9.5)
Net cash flow from operating activities 2.2 9.6 2.2 9.6
- of which included in continuing operations (11.0) (6.2) (11.0) (6.2)
- of which included in discontinuing operations 13.2 15.8 13.2 15.8
Cash flow from investing activities
Proceeds from sale of property, plant, and equipment (PP&E) and intangible assets 0.0 0.0 0.0 0.0
Purchases of property, plant and equipment (PP&E) and intangible assets 0.1 (0.7) 0.1 (0.7)
Capitalized R&D costs (2.8) (5.0) (2.8) (5.0)
Proceeds from disposal of subsidiaries and associated companies, net of cash disposed 4 85.8 - 85.8 -
Purchases of subsidiaries and associated companies, net of cash acquired (0.1) (0.2) (0.1) (0.2)
Net cash flow from investing activities 83.0 (6.0) 83.0 (6.0)
- of which included in continuing operations (0.1) (0.0) (0.1) (0.0)
- of which included in discontinuing operations 83.1 (6.0) 83.1 (6.0)
Cash flow from financing activities
Proceeds from exercise of treasury shares (incentive program) 0.0 0.1 0.0 0.1
Proceeds from non-controlling interests 4 30.8 0.0 30.8 0.0
Purchase of treasury shares (52.1) (0.4) (52.1) (0.4)
Proceeds from issuance of shares, net (equity increase) (0.0) (0.0) (0.0) (0.0)
Proceeds from loans and borrowings 9 0.0 10.0 0.0 10.0
Repayments of loans and borrowings 9 (35.5) (0.7) (35.5) (0.7)
Payment of finance lease liabilities 12 (1.5) (1.4) (1.5) (1.4)
Net cash flow from financing activities (58.3) 7.5 (58.3) 7.5
- of which included in continuing operations (87.6) 8.8 (87.6) 8.8
- of which included in discontinuing operations 29.4 (1.3) 29.4 (1.3)
Net change in cash and cash equivalents 26.9 11.1 26.9 11.1
Cash and cash equivalents (beginning of period) 41.9 28.3 41.9 28.3
Effects of exchange rate changes on cash and cash equivalents (0.9) (5.8) (0.9) (5.8)
Cash and cash equivalents 1) 68.0 33.5 68.0 33.5
- of which included in cash and cash equivalents in the balance sheet 68.0 33.5 68.0 33.5
- of which included in the assets of the disposal group (assets held for sale) - - - -
1)
Of which $0.1 (6/30/20: $0.8) million is restricted cash and cash equivalents as of June 30, 2021.
Reconciliation of profit (loss) before taxes 1H 2021 1H 2020 YTD 2021 YTD 2020
Profit (loss) before income taxes (11.8) 6.3 (11.8) 6.3
Profit (loss) from discontinuing operations, net of tax 4 56.4 (3.0) 56.4 (3.0)
Provision for taxes, discontinued operations 4 3.8 (1.6) 3.8 (1.6)
Profit (loss) before taxes, as presented in the statement of cash flows above 48.4 1.8 48.4 1.8Consolidated statement of changes in equity
Reserve Trans- Non-
(USD million) Number Paid-in Other for own lation Other controlling Total
of shares capital reserves shares reserve equity interests equity
Equity as of 12/31/2020 137.6 348.1 64.4 (69.3) (30.2) (6.2) (0.4) 306.3
Comprehensive income (loss)
Profit (loss) - - - - 43.6 - 43.6
Other comprehensive income (loss)
Foreign currency translation differences - - - 1.7 - - 1.7
Total comprehensive income (loss) - - - 1.7 43.6 - 45.4
Contributions by and distributions to owners
Dividends - - - - - - 0.0
Issuance of ordinary shares related to business combinations - - - - - - -
Issuance of ordinary shares related to incentive program - - - - - - -
Issuance of ordinary shares related to equity increase (0.0) - - - - - (0.0)
Capital decrease 0.0 (121.4) - 121.4 - - - 0.0
Treasury shares purchased (12.8) - - (52.1) - - - (52.1)
Treasury shares sold - - 0.0 - - - 0.0
Tax deduction on equity issuance costs - - - - - - 0.0
Share-based payment transactions - (12.7) - - - - (12.7)
Total contributions by and distributions to owners (12.8) (121.5) (12.7) 69.3 - - - (64.8)
Other equity changes
Divestment of a subsidiary - - - - (0.4) 0.4 0.0
Other changes - 0.0 - - 0.0 - 0.0
Total other equity changes - 0.0 - - (0.4) 0.4 0.0
Equity as of 6/30/2021 124.7 226.7 51.7 (0.0) (28.5) 37.0 0.0 286.9
Non-controlling interests
During 1H 2021, Otello Corporation ASA ownership in Bemobi has been reduced to 36%. Please see Note 4 for further information.
Share capital decrease
Reference is made to the resolution by the annual general meeting on June 2, 2021, where a resolution was passed to reduce the share capital of the
parent company, Otello Corporation ASA, by cancellation of 13,727,702 treasury shares. The share capital reduction has been registered with the
Norwegian Register of Business Enterprises, and the new registered share capital of the parent company is NOK 2,494,994.54, and the
total share count is 124,749,727
Treasury shares and ordinary share
During 1H 2021, Otello purchased 12,848,789 (YTD: 12,848,789) treasury shares for $52.1 million (YTD: $52.1 million), and sold 0 (YTD: 0) treasury
shares for $0.0 million (YTD: $0.0 million).
During 1H 2021, Otello issued 0 (YTD: 0) ordinary shares related to the incentive program, 0 (YTD: 0) ordinary shares related to business
combinations, and 0 (YTD: 0) ordinary shares related to an equity increase. As of June 30, 2021, Otello owned 15,904 treasury shares.
Equity as of 12/31/2019 137.9 348.1 53.6 (67.6) (14.1) 17.2 1.9 339.1
Comprehensive income (loss)
Profit (loss) - - - - 0.4 0.5 0.8
Other comprehensive income (loss)
Foreign currency translation differences - - - (34.1) - (2.9) (37.0)
Total comprehensive income (loss) - - - (34.1) 0.4 (2.5) (36.2)
Contributions by and distributions to owners
Dividends - - - - - - -
Issuance of ordinary shares related to business combinations - - - - - - -
Issuance of ordinary shares related to incentive program - - - - - - -
Issuance of ordinary shares related to equity increase (0.0) - - - - - (0.0)
Capital decrease - - - - - - -
Treasury shares purchased (0.4) - - (0.4) - - - (0.4)
Treasury shares sold 0.0 - - 0.1 - - - 0.1
Tax deduction on equity issuance costs - - - - - - 0.0
Share-based payment transactions - 1.2 - - - - 1.2
Total contributions by and distributions to owners (0.3) (0.0) 1.2 (0.4) - 0.0 0.0 0.8
Other equity changes
Divestment of a subsidiary - - - - - - 0.0
Other changes - (0.0) - - 0.0 - 0.0
Total other equity changes 0.0 (0.0) - - 0.0 - 0.0
Equity as of 6/30/2020 137.6 348.1 54.8 (68.0) (48.2) 17.5 (0.5) 303.8Notes to the condensed consolidated interim financial statements
Note 1 - Corporate information
Otello ("the Group") consists of Otello Corporation ASA ("the company") and its subsidiaries. Otello Corporation ASA (formerly Opera
Software ASA) is a public limited liability company domiciled in Norway. The condensed consolidated interim financial statements ("interim
financial statements") comprise Otello Corporation ASA and its subsidiaries (together referred to as the "Group"), and the Group's
investments in associates. Otello Corporation ASA is traded under the ticker "Otello" on the Oslo Stock Exchange.
Note 2 - Basis of preparation
These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
The interim financial statements do not include all of the information and disclosures required for a complete set of financial
statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended December
31, 2020. The interim financial statements have not been subject to audit or review.
The interim financial statements are presented in US dollars (USD), unless otherwise stated. As a result of rounding differences,
amounts and percentages may not add up to the total.
Note 3 - Accounting policies and critical accounting estimates
Accounting policies
The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the
preparation of the Group’s consolidated financial statements for the year ended December 31, 2020.
Critical accounting estimates
The preparation of interim financial statements requires Management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ
from these estimates.
Other than as discussed in Note 4 regarding the earnout calculation from the sale of AdColony, in preparing these condensed interim
financial statements, the significant judgments made by Management in applying the Group's accounting policies and the key sources
of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended December 31,
2020.Note 4 - Discontinued operations Definitive agreement to sell AdColony to Digital Turbine Otello announced on February 26, 2021, that it had entered into a definitive agreement to sell AdColony to Digital Turbine, Inc. (Nasdaq: APPS) for a total estimated consideration of $400 million. Digital Turbine is a global mobile technology company, passionate about delivering the right content to the right person at the right time across all Android devices. The company's on-demand media platform powers frictionless app and content discovery, user acquisition and engagement, operational efficiency, and monetization opportunities. Digital Turbine's technology platform has been adopted by more than 40 mobile operators and OEMs worldwide, and has delivered more than three billion app preloads for tens of thousands of advertising campaigns. The Company is headquartered in Austin, Texas, with global offices in Arlington, Durham, Mumbai, San Francisco, Singapore and Tel Aviv. The transaction is supported by the Board of Directors of Otello (the "Board") as well as the management of Otello and AdColony. The Board submitted the transaction to the Otello shareholders for approval at an extraordinary general meeting which took place on March 26, 2021 (the "EGM"). The vast majority of votes represented at the EGM voted in favor of the sale. The transaction closed on April 28, 2021. The completion of the transaction was subject to customary closing conditions. LUMA Securities LLC acted as exclusive financial advisor and Hogan Lovells LLP served as legal advisor to Otello in conjunction with the transaction. Consideration and contingent assets Initially, the total estimated consideration for the acquisition of AdColony by Digital Turbine was $400 million, including a normalized amount of working capital and $19 million in cash. Some or all of the cash will be returned to Otello subject to the achievement of certain future net revenue targets. Consideration for the acquisition will be as follows: (1) $100 million in cash paid at the Closing (the “Closing Cash Consideration Amount”), subject to adjustment as described below; and (2) $100 million in cash to be paid on or before the 180th day following the Closing Date (the “Second Cash Consideration Amount”), less the aggregate amount of all Transaction-Related Bonuses payable on or promptly following the time of payment of the Second Cash Consideration Amount; and an amount in cash calculated as follows (the “Earnout Payment Amount”): A. if Net Revenues for the Earnout Period equals or exceeds one hundred five percent (105%) of the Earnout Target Amount with respect to such period, an amount equal to: (I) two hundred seventy-five percent (275%) of such Net Revenues, plus (II) $9.5 million, plus (III) if Net Revenues for the earnout period equals or exceeds one hundred seven and two-tenths percent (107.2%) of the Earnout Target Amount with respect to such period, $9.5 million; B. if Net Revenues for the Earnout Period equals or exceeds one hundred percent (100%) of the Earnout Target Amount with respect to such period and is less than one hundred five percent (105%) of the Earnout Target Amount with respect to such period, an amount equal to: (I) two hundred twenty-three percent (223%) of such Net Revenues, plus (II) $9.5 million; C. if Net Revenues for the Earnout Period equals or exceeds ninety percent (90%) of the Earnout Target Amount with respect to such period and is less than one hundred percent (100%) of the Earn-Out Target Amount with respect to such period, an amount equal to two hundred ten percent (210%) of such Net Revenues; D. if Net Revenues for the Earnout Period equals or exceeds eighty-five percent (85%) of the Earnout Target Amount with respect to such period and is less than ninety percent (90%) of the Earnout Target Amount with respect to such period, an amount equal to two hundred percent (200%) of such Net Revenues; E. if Net Revenues for the Earnout Period equals or exceeds eighty percent (80%) of the Earnout Target Amount with respect to such period and is less than eighty-five percent (85%) of the Earnout Target Amount with respect to such period, an amount equal to one hundred seventy-five percent (175%) of such Net Revenues; F. if Net Revenues for the Earnout Period equals or exceeds seventy-five percent (75%) of the Earnout Target Amount with respect to such period t h 2 and is less than eighty percent (80%) of the Earnout Target Amount with respect to such period, an amount equal to one hundred fifty percent (150%) of such Net Revenues;
Note 4 - Discontinued operations (continued)
G. if Net Revenues for the Earnout Period equals or exceeds seventy percent (70%) of the Earnout Target Amount with
respect to such period and is less than seventy-five percent (75%) of the Earnout Target Amount with respect to such period,
an amount equal to one hundred twenty-five percent (125%) of such Net Revenues;
H. if Net Revenues for the Earnout Period equals or exceeds sixty-five percent (65%) of the Earnout Target Amount with
respect to such period and is less than seventy percent (70%) of the Earnout Target Amount with respect to such period,
an amount equal to one hundred percent (100%) of such Net Revenues; and
I. if Net Revenues for the Earnout Period is less than sixty-five percent (65%) of the Earnout Target Amount with respect to
such period, no payment shall be made.
The Earnout Target Amount = $200.0 million + $9.5 million in working capital cash.
Closing Cash Consideration Amount April 28, 2021 Working
Capital
(USD million) Adjustment
Closing Cash Consideration Amount 100.0
minus: Indebtedness Payoff Amount 0.0
minus: Transaction Expenses Amount (2.4)
minus: Closing Bonus Amount (4.0)
minus: Closing Bonus Employer Taxes (0.1)
Estimated Working Capital Surplus / (Shortfall) (3.3) (5.8)
Estimated Net Cash Surplus / (Shortfall) 1.9 3.9
Closing Payment 92.1 (1.8)
Future payments - estimates Second Cash Earnout
Consideration Payment
(USD million) Amount Amount
Cash Consideration Amount 100.0 200.0
minus: Transaction Expenses Amount (2.0) (4.0)
minus: Bonus Amount (2.8) (8.1)
minus: Bonus Employer Taxes (0.1) (0.2)
Closing Payment 95.1 187.6
Adjusted closing Payment - 105.5% 198.6
Actual, unaudited 2Q21 performance for AdColony on net revenue was @ 96.7% vs. the plan agreed with Digital Turbine,
which is tied to our annual guidance of $250-290 million in Gross Revenue. Combined with the actual, unaudited 1Q21
performance for AdColony on net revenue which was @ 106.35% the 1H21 performance vs the plan was 101.03%. AdColony's
1H21 performance extrapolated for the full FY 2021 would yield a payout of around 105.5% of plan or around $211 million for
the earn-out portion of the payment.
The Second Cash Consideration Amount and the working capital adjustment is booked as a receivable in the balance sheet.
However, the estimated Earnout Payment Amount is not accounted for in the financial statements as it is treated as a
contingent asset.Note 4 - Discontinued operations (continued) GDPR As reported in the media, on January 14, 2020, the Norwegian Consumer Council (NCC) filed a complaint to the Norwegian Data Protection Authority (DPA) against Grindr and five other companies, including AdColony, who is a supplier to Grindr. The NCC requests that the DPA investigate certain alleged breaches of the General Data Protection Regulation (GDPR) relating to the processing of personal data about Grindr users received from Grindr through the Grindr app. As of the date of this report, AdColony has not received any formal notification or complaint from the DPA. AdColony is currently looking into the NCC’s complaint and will provide further information if and when necessary. The Company has not recognized any contingent liabilities in the interim financial statements related to this matter. Please see below for a summary of material indemnification-related obligations of Otello under that certain Share Purchase Agreement between Otello and Digital Turbine. Material Indemnification-Related Post-Earnout Obligations Below is a summary of material indemnification-related obligations of Otello Corporation ASA (“Otello”) under that certain Share Purchase Agreement, dated February 26, 2021 (the “SPA”), between Otello, Digital Turbine, Inc., Digital Turbine Media, Inc. (“DT”) and AdColony Holding AS (“AdColony”), following the settlement of DT’s earnout obligations under the SPA. The summary below does not purport to be a complete and accurate summary of Otello’s obligations under the SPA. For a complete understanding of all of Otello’s obligations under the SPA, reference should be made to the full text of the SPA, which can be found at: https://ir.digitalturbine.com/all-sec-filings/content/0001104659-21-060531/0001104659-21-060531.pdf None of the Indemnification Obligations of Otello, as presented below, has been recognized as liabilities in the financial statement as it has yet to be confirmed whether Otello has a present obligation that could lead to an outflow of economic benefits, nor does the Indemnification Obligations of Otello meet the recognition criteria in IAS 37 as it is not probable that an outflow of economic benefits will happen at this stage. Indemnification Obligations of Otello Otello is obligated to indemnify (subject to certain limitations) DT and its affiliates for losses related to the following matters: (i) breaches or inaccuracies of certain representations and warranties; (ii) breaches of certain covenants by Otello and AdColony; (iii) pre-closing and certain other taxes; (iv) the operations and subsequent sale of Skyfire Labs, Inc.; and (v) certain specified matters, consisting of (A) an action for a claim under the Children’s Online Privacy Protection Act; (B) fines levied by the Norwegian Data Protection Authority pursuant to certain data privacy matters; (C) fines arising from a civil investigation by the Federal Trade Commission in connection with certain data privacy matters; (D) a claim for breaches of certain non-solicitation obligations of AdColony and its subsidiaries; and (E) a harassment claim against a former executive of AdColony.
Note 4 - Discontinued operations (continued)
Bemobi IPO successfully completed
On February 9, 2021, Otello announced that Bemobi Mobile Tech S.A. ("Bemobi Brazil"), had set a price of 22.00 Brazilian
real (“R$”) per common share for its IPO. Based on this price, the gross proceeds of the primary component of the IPO reached
R$ 1,094,117,684 ($203,943,536), resulting in an equity value, post-money, of Bemobi Brazil at IPO of R$ 2,000,000,024
($372.800.004).
On February 10, 2021, Bemobi Brazil had its first day of trading on the Bovespa stock exchange in Sao Paolo, Brazil, under the
ticker “BMOB3”. Otello’s ownership pre-IPO was 34,553,860 shares in Bemobi, equal to 83.92% ownership, with other
shareholders holding 6,622,610 shares (16.08% ownership) and hence a full share count of 41,176,470. The base offering for
the IPO was 49,732,622 shares, hence giving a total share count post-IPO of 90,909,092 shares, with Otello’s ownership
reduced to 38.01%. The managers in the IPO had a greenshoe option where Otello could sell up to 6,388,478 additional
shares at the IPO price (R$22) by reducing its ownership to 30.98% and resulting in a gross payment to Otello of up to
R $140,546,516 (approximately $26 million). The managers in the IPO sold an additional 1,834,272 of the potential
6,388,478 shares under the greenshoe option, reducing Otello's ownership in Bemobi Brazil to 35.99%. After fees and taxes,
Otello Technology Investment AS received net proceeds from the greenshoe option of R$ 33,583,598.60 (approximately
$6 million).
As part of the use of proceeds in connection with the IPO, a dividend and share proceed payment of R$ 431,637,688.80
(approximately USD 78 million), less R$ 543,334.35 in Brazilian tax, has been paid from Bemobi Brazil to Otello Technology
Investment AS (formerly Bemobi Holding AS), of which R$ 362,215,321.83 (approximately USD 65 million), less the relevant
share of the Brazilian tax, will be paid to Otello Corporation ASA.
Information regarding the IPO of Bemobi Brazil, including the Brazilian Final Prospectus, is available in Portuguese on the
websites of Bemobi Brazil (https://www.bemobi.com.br), the Brazilian underwriters, the CVM and the São Paulo stock exchange.
Following the successful IPO of Bemobi on Bovespa in Brazil, Otello Corporation ASA ("Otello") is now a major shareholder in
Bemobi Brazil with an ownership below 50%. Consequently, Bemobi financials are no longer consolidated into Otello's accounts
but are booked according to the equity method. Please see note 6 for more information about the equity method accounting.
Earn-out agreement and Security Holders agreements with Bemobi Mobile Tech S.A
The Group acquired the Brazilian subsidiary Bemobi Mobile Tech S.A (formerly Bemobi Midia e Entretenimento Ltda) (“Bemobi
Brazil”) in 2015. As part of the acquisition agreement, an earn-out agreement was entered into with the former owners. In 2018,
this earn-out agreement was renegotiated in a Security Holders agreement, with a partial cash settlement of USD 20 million
and 11.2 % shares in the intermediate holding company Otello Technology Investment AS (formerly Bemobi Holding AS). The
shares were to be held in escrow until a major transaction in relation to Bemobi Brazil should take place (a qualified sale or an
Initial Public Offering "IPO"). If such a major transaction did not take place within certain deadlines, the former owners of Bemobi
Brazil could require Otello to acquire the shares at a fixed amount.
In January 2020, an amendment to the Security Holders agreement was agreed, regarding the deadline and fixed amount.
The deadline for a major transaction was set at December 31, 2020, and the fixed amount was set at USD 18.6 million.
At the same time, an RSU Award agreement was reached between Otello Technology Investment AS, the holding company of
Otello’s Bemobi business and Bemobi Brazil’s CEO, Pedro Ripper regarding a share-based incentive program.
In January 2021, the parties again renegotiated the deadline for when an IPO could occur (at the same time removing a
qualified sale as an option for a major transaction), and the conditions regarding transferring the shares in Otello Technology
Investments AS. The deadline was set at February 15, 2021. The fixed amount was unchanged at USD 18.6 million.
With the announcement of Bemobi Brazil's IPO on February 9, 2021, the clauses relating to the occurrence of a major
transaction are no longer relevant. For more information regarding the IPO, please see above.
At the same time, the parties renegotiated the Security Holders agreement concerning the number of shares that the
former owners of Bemobi Brazil were to receive. This was increased from 11.2 % to 16.083% of the shares in Otello Technology
Investments AS, and shares in Bemobi Brazil also equaling 16.083%. The increase from 11.2% to 16.083% represents an
additional portion agreed with Bemobi Brazil’s CEO, Pedro Ripper, as acknowledgement for his part in negotiations of the
transaction and subsequent agreements with Otello.
Further, in January 2021, the above-mentioned RSU Award agreement with Bemobi Brazil’s CEO, Pedro Ripper was agreed
to be terminated. Pedro Ripper and the intermediate holding company of Otello’s Bemobi business, Otello Technology
Investment AS, entered into a Share Call Option agreement. This agreement ensures that shares will be granted to Pedro Ripper
upon an IPO of Bemobi Brazil. The shares are not automatically forfeited if his employment terminates. However, Otello
Technology Investment AS might choose to exercise the call option. In addition, Pedro Ripper and Otello Technology Investment
AS entered into a Voting agreement. This agreement put in place a “lock-up” of Ripper’s shares and gives him voting instructions
issued by Otello Technology Investment AS.Note 4 - Discontinued operations (continued)
Effect of disposals on the financial position of the Group
Adcolony Bemobi 6/30/2021 6/30/2020
(USD million)
Net asset and liabilities (230.0) (35.6) (265.6)
Banker fees and other fees (11.4) (0.3) (11.7)
Consideration to earnout participants - (13.3) (13.3)
Estimated consideration, to be satisfied in cash (incl NWC adjustment) 196.7 41.6 238.4
FV assessment recognized using the equity method - 133.2 133.2
Estimated deferred tax liabilites on sale of shares - (19.7) (19.7)
Acquisition cost - (6.0) (6.0)
Estimated net profit (44.7) 100.0 55.3
Consideration received, satisfied in cash 92.1 41.3 133.4
Cash and cash equivalents disposed (24.8) (22.8) (47.6)
Net cash inflows *) 67.3 18.5 85.8
*)
Proceeds from disposal of subsidiaries and associated companies, net of cash disposed
Proceeds from non-controlling interests - 30.8 30.8
*)
Net cash inflows 0.0 30.8 30.8
*)
Proceeds from non-controlling interests (sale of shares)
The AdColony earnout amount are exclued in the calculation of the estimated net profit as the estimated Earnout Payment
Amount is not accounted for in the financial statements as it is treated as a contingent asset.Note 4 - Discontinued operations (continued)
Results of discontinued operations 1H 2021 1H 2020 % YTD 2021 YTD 2020 %
(USD million, except earnings per share) change change
Revenue 80.6 109.7 -27 % 80.6 109.7 -27 %
Operating expenses (73.3) (114.6) -36 % (73.3) (114.6) -36 %
Operating profit (loss), (EBIT), excluding impairment and restructuring expenses 7.2 (4.9) 7.2 (4.9)
Impairment and restructuring expenses (1.3) 1.1 (1.3) 1.1
Operating profit (loss), (EBIT) 5.9 (3.8) 5.9 (3.8)
Net financial items (1.0) (0.8) (1.0) (0.8)
Profit (loss) before income tax 4.9 (4.5) 4.9 (4.5)
1)
Provision for taxes (3.8) 1.6 (3.8) 1.6
Profit (loss) from discontinued operations, net of tax 1.1 (3.0) 1.1 (3.0)
Net gain (loss) from sale of discontinued operations, net of tax 55.3 0.0 55.3 0.0
Profit (loss) from discontinued operations 56.4 (3.0) 56.4 (3.0)
Earnings per share (discontinued operations):
Basic earnings (loss) per share (USD) 0.42 (0.02) 0.42 (0.02)
Diluted earnings (loss) per share (USD) 0.42 (0.02) 0.42 (0.02)
Shares used in earnings per share calculation 133,884,337 137,705,818 133,884,337 137,705,818
Shares used in earnings per share calculation, fully diluted 133,884,337 137,705,818 133,884,337 137,705,818
1)
The 1H and YTD provision for taxes is based on an estimated tax rate for the Group.
Cash flow information 1H 2021 1H 2020 YTD 2021 YTD 2020
(USD million)
Cash flow from operating activities 13.2 15.8 13.2 15.8
Cash flow from investing activities 83.1 (6.0) 83.1 (6.0)
Cash flow from financing activities 29.4 (1.3) 29.4 (1.3)Note 5 - Potential sale of Vewd minority stake
Otello's case regarding the potential sale of Vewd minority stake
As reported to the market on September 14, 2018, Otello was successful in its claim in the High Court of Justice of England and Wales
against Moore Frères & Co LLC ("MFC") and Last Lion Holdings Limited (“Last Lion”), arising from the refusal of the Board of Last Lion, which
is controlled by appointees of MFC, to approve the sale of Otello’s remaining ownership stake in Last Lion, being approximately 27%
in the Vewd Software business. The judge granted Otello the injunction it sought requiring the Board to approve the buyer.
The buyer did not purchase the shares on the terms of the expired Share Purchase Agreement. Otello subsequently restored the proceedings
in order to pursue alternative remedies. The High Court determined that MFC should be required to purchase Otello’s shares in Last Lion
from Otello for the sum of $48 million and that MFC should be required to purchase the Loan Note issued in Otello’s favour by a subsidiary
of MFC for $5 million plus accrued interest at the time of purchase (currently approximately $1.2 million). It is however understood that MFC’s
only substantial asset is its shareholding in Last Lion.
In default of compliance by MFC with the order for the purchase of Otello’s shares in Last Lion and the Loan Note, the High Court ordered that
all of the shares in the Company shall be sold to a third party with a receiver appointed with all necessary powers to conduct the sale with the
net proceeds of a sale being applied in satisfaction of MFC’s obligation to purchase the shares and the Loan Note. The court ordered that
a receiver will be appointed if MFC had not purchased Otello’s shares in Last Lion and the Loan Note by January 8, 2021. That deadline was
extended to March 19, 2021 following agreement between MFC and Otello to allow further time for MFC to seek refinancing to raise funds to
enable it to pay in full the sums due to Otello. The English High Court had ordered that the appointment of a receiver (or alternatively a special
committee of the board of Last Lion Holdings Limited tasked with selling the company or raising finance) would take effect on March 22, 2021,
if Otello has not been paid the sums due to it by March 19, 2021.
On March 17, 2021, MFC and Otello together with the Vewd Group's secured lenders (the “Lenders”) under a Credit Agreement dated
December 19, 2016 between Last Lion HoldCo AS, Vewd Software AS, the Lenders and Wilmington Trust National Association ("Wilmington
Trust") reached agreement that as an interim alternative to the appointment of a receiver, a special committee (the "Special Committee") of the
board of Last Lion Holdings Limited shall be appointed. The Special Committee was tasked with selling the company or raising finance. The
agreement as to the Special Committee's terms of appointment was recorded in an order of the High Court dated 1 April 2020. The Special
Committee was appointed on 26 April 2021.
MFC was ordered to pay Otello’s costs of this part of the proceedings (having previously been ordered to pay and having paid the costs of the
liability stage). MFC was ordered to pay £1.25 million as an interim payment on account by 31 December 2020, which it failed to do. The costs
have been agreed at £1.5 million and the High Court ordered that sum should be paid by MFC to Otello by 19 March 2021. MFC failed to pay
and interest is now running on that sum at the judgment rate of 8% from 31 December 2020 on £1.25 million and on the balance of £250,000
from 26 February 2021. MFC has also been ordered to pay further costs totalling £70,000 in respect of hearings since the handing down of
judgment and those costs are also unpaid with interest running, also at 8%. Otello is seeking to enforce these costs awards against MFC’s
assets in New York.
If the Special Committee were successful in achieving either a sale or a refinancing at a sufficient level once the sums due to the Lenders
have been repaid, Otello will receive:
(1) For its shares in Last Lion, either
(i) $48 million plus accrued interest from January 8, 2021 at US Prime interest rate plus 1% or
(ii) its pro rata share of any sale proceeds, whichever is greater; and
(2) The face value of $5 million plus accrued interest thereon in respect of the secured promissory note issued to Otello by Last Lion
Management LLC, together with all sums due in respect of cost orders made during the court proceedings together with accrued interest on
those cost orders.
On 12 July 2021, we were informed of the resignation of the three members of the Special Committee. The Special Committee members have
given as their reason for resigning, the exercise of certain rights by Wilmington Trust as agents for the Lenders under the Credit Agreement.
Wilmington Trust, on behalf of the Lenders, has accelerated the loans and exercised certain rights and remedies under the Credit Agreement
so as to remove Martez Moore from the boards of Last Lion HoldCo AS and Vewd Software AS and to enable the appointment of the Special
Committee members directly to those boards. The reason provided by the Lenders for exercising rights and remedies was to preserve the
value of the business, noting that, among other things, Mr. Moore had paid himself and his family (including his late wife's estate) millions of
dollars since 2016.
The implications of these actions are not yet clear, although the Special Committee members have indicated that they are likely to accept the
invitation to join the boards of Last Lion HoldCo AS and Vewd Software AS and that following such appointments they would remain committed
to pursuing a sale and/or refinancing transaction that maximizes value. It is Otello's understanding that the investment bank that has been
appointed by the Special Committee will continue and remains focused on achieving a successful sale or refinancing of the business through
a competitive and robust process. As was the situation before this development, it is likely that Otello will only be able to recover the sums due
to it once the Lenders have been repaid in full.
The English Court order requiring the establishment of the Special Committee remains in force and that order formally requires that
alternative members will need to be appointed to the Special Committee. After three months from the appointment of the Special Committee
(which fell on 26 July 2021), Otello has the right to terminate the Special Committee process and seek the appointment by the English Court
of a Receiver in respect of LLH. In the absence of such termination by Otello, the appointment of the Special Committee will end on 1 October
2021, unless extended with the consent of Otello and the Lenders. Following any such termination, Otello has the right to seek further relief
from the English High Court including the appointment of a receiver in respect of LLH.You can also read
